A Peculiar Moment

Since 2022 the US VC market, in all stages, has clearly shifted to become investor friendly.

With one exception, though: AI startups are commanding bull-market prices.

Let’s take, for instance, the recent (May 2023) equity financing round of Rewind AI, which is developing a MacOS app search engine that promises to record everything you see, say, or hear, making it searchable – its marketing pitch is: “What if you had perfect memory?”

In November 2022 Rewind AI got a $10M round at a $75M valuation from Andreessen Horowitz. Now, for its Series A round, Rewind AI’s founders decided to follow an unorthodox funding raising process by sharing a link to an online form and asking investors to state “the highest amount you are comfortable” paying between $200M and $1B. We “decided to forgo the silly tradition of raising a round privately and only talking to a small handful of folks. The major benefit of making our pitch public was that we could cast a wide net.”

The results were incredible! Rewind AI’s investor pitch was viewed 1.7M times on Twitter and generated 1,010 preliminary offers to invest, funneled down to 170 committed offers. Of those, 22 investors were willing to invest at a billion-dollar valuation.

At the end, Rewind AI chose NEA VC fund, who committed $12M at a $350M (only!) valuation (≈500x revenues and a 4.5x step-up in six months), because of NEA’s “long-term orientation” and because they are “buyers, not sellers at the IPO.”

Conclusion

What a peculiar moment Silicon Valley is experiencing right now. Many “traditional” startups are drowning without fresh cash or accepting tougher terms, while AI startups are being flooded with new capital.

AI is a transformational technology and, no doubt, many great opportunities will be created around AI.

However, Fabrica Ventures is taking it with a grain of salt not to be engulfed by irrationality.